6th Feb 2015 08:57
LONDON (Alliance News) - Poundland Group PLC shares pushed higher on Friday morning after the retailer snapped up rival 99p Stores in a GBP55 million cash and shares deal.
FTSE 250-listed Poundland said it will pay GBP47.5 million in cash for its fellow high-street discounter, along with a further GBP7.5 million in shares. Based on its closing price of 357.8 pence on Thursday, that would see Poundland issue 2.1 million shares. It said the equity placing will happen at or immediately prior to the closing of the deal and an increase in Poundland's revolving credit facilities.
The deal includes 99p Stores' network of 251 stores, which trade at 99p Stores and Family Bargains, along with its warehouse and distribution centre. Poundland said. In the year to February 1, 2014, 99p Stores reported underlying earnings before interest, taxation, depreciation and amortisation of GBP6.1 million on sales of GBP370.4 million, it said.
Poundland said the deal will be conditional upon the approval of the UK Competition and Markets Authority. Poundland said that following initial talks with the competition regulator, it may have to offer concessions to get the deal passed, owing to the size of the two companies.
It said the CMA will start a public consultation and review process shortly, which is expected to take around two months. The deal is conditional on the outcome of this consultation being acceptable to both Poundland and the CMA, the retailer said.
"This is a good deal for both businesses and will benefit customers and shareholders. Through working together, Poundland will improve choice, value and service for 99p Stores' customers, bringing Poundland's proven know-how and range to 99p Stores," said Poundland Chief Executive Jim McCarthy.
Poundland shares were up 8.0% to 386.40 pence on Friday morning, comfortably the best performer in the FTSE 250.
The deal to buy 99p Stores comes after Poundland in January saw its shares fall after it said sales from its new stores slowed in the third quarter and over the Christmas trading period, despite overall sales rising 10%.
The new store sales were slowed by delays to new openings in the quarter to December, in line with similar problems seen in the first half.
By Sam Unsted; [email protected]; @SamUAtAlliance
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